Declining Balance Method

DEFINITION of 'Declining Balance Method'

A common depreciation-calculation system that involves applying the depreciation rate against the non-depreciated balance. Instead of spreading the cost of the asset evenly over its life, this system expenses the asset at a constant rate, which results in declining depreciation charges each successive period.

BREAKING DOWN 'Declining Balance Method'

For example, if an asset that costs $1,000 is depreciated at 25% each year, the deduction is $250.00 in the first year and $187.50 in the second year, and so forth.

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